US Dollar Buy Signal

Well, I am fresh off of my Europe trip and ready to study the charts this week. I’ll start by posting a few charts of the US dollar. I have talked about these buy and sell signals in the past and wasn’t surprised to see this pattern upon my return. I was witness to the USD gaining some strength over the past few weeks while traveling. The large chart shows that this is the first true buy signal in more than 3 years (2005).

UPDATE: You can trade the USD like a stock by buying the long or short ETF:
Long: PowerShares DB U.S. Dollar Bullish (UUP)
Short: PowerShares U.S. Dollar Bearish (UDN)
I will cover these in an additional post later this week.

The metals have been weak; especially Platinum and Gold (see this February post, 02/18/08: Platinum Climax Top?, where I highlighted the climax top in Platinum). I’ll admit: these things take time but typically work out if you stay with the signs and have the patience to pounce when the move begins. The signs started in February but didn’t give the signal until July.

Comments

Chris, Thanks for providing and explaining US dollar buy signal. For people who don’t trade currencies, how do we make use of this info. Do you have any group of companies or industries which would benefit by this, so that we can buy those stocks.
Also, I watch your pages to understand how charts and market works. Good work..please keep it up.
Thanks, Mark.

Hey there!
My name is David Halsey. I have a trading blog dedicated to futures trading. I’ve visited you site for the last couple months and really enjoy reading your posts. I was wondering if you consider including me in your blog roll. I’d be happy to do the same for you. Take a look at my blog or follow it for a while. If you like what you see please add me. I’d really appreciate it.
Thank you,
Dhalsey

Maybe you have covered this before and I missed it when you were covering Trader Vic styles, but can you explain why we want to use the 10/30 EMA instead of using 10/30 MA for buy and sell crossover signals on the weekly charts?
Thanks!

Hi Chris,
The price breakout in the USD is certainly clear but I wonder if this might be from a combination of short covering and a bounce from pretty oversold levels (particularly on the monthly chart).
In other words is it not worth waiting a bit to see how / if the market follows through on the move before taking long positions ?
Thanks
Pro

Pro,
What you say may be true but I am going by the 10/30 crossover. It’s the first time in more than 3 years. Shorts have spiked the dollar before: November 2007, April 2008, June 2008, etc. But this time it catches my attention because of the moving averages.

You take the trades based on risk/reward and remember that not every one will work out. Waiting allows a winner to slip away when it is too late to trade. I can always sell if the trade is no good – no risk in that.

Chris – thanks for the post but I respectfully disagree with your buy signal on the USD … as you said yourself in your last comment, it’s the first time in more than 3 years that it bounced back… trends just don’t change like. I see the recent move more like a good short opportunity as soon as we see an indecision candle… IMHO.

Sharp2Be,
Take a look at the article in the comment above. I don’t know how much weight I put into it but it raises an eyebrow.

You are correct, trends “don’t change” quickly but it’s been more than 6 years down. 2005 saw a nice surge but secondary indicators are different this time around. We’ll see. It will take time to change the trend, could be years but it looks like a low may have been hit.

We have recently launched a new website, http://www.tradememe.com and it is a business news aggregator. We are wondering whether you would be interested in having your RSS feed included in the list of business blog feeds.

Question I am having trouble answering…when I receive a signal, what time frame should I look at to determine whether I should enter order.

What is relationship between weekly and daily versus hourly and half-hour periods? If weekly and daily are negative but shorter-term intervals are positive, does a trader make their decision based upon the shorter-term or longer term?

This is one of the best investment sites I have ever seen! Your witty, independent, experience-tested thoughts are so enlightening!
I started my trading career with the CAN-SLIM formula and fine-tuned it over the years for myself. It’s one of the greatest systems out there, but I dislike its many blind followers–even if they blindly follow something I personally agree with. Clearly you are not one of them!
Thanks and congratulations!

I agree with you 100% on this. I actually have been long commodities for the bast several years, but I became confused on the macroeconomics of what’s going on. I just finished MBA school and figured out that what they teach you there is crap. I’m just not smart enough to figure out what’s going on in the markets so I just do quant research to determine what Actually works instead of theoretically works. I’ll put a post on my blog and show you the results of the 10/30 futures trading system.

Max,
I use the annotation tool on Stockcharts.com and store the charts in my premium account. It costs me about $20 per month for these features (500 charts in multiple lists can be saved in real time).

[…] been front and center in my portfolio for a while now. I started to jump on the dollar bandwagon (8/24/08: US Dollar Buy Signal and 12/17/07: US Dollar Snapshot) prior to its bottom in early 2008 and I am now interested in […]

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